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What Apple Inc. FQ4 2017 Guidance Really Says About iPhone 8

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When Apple Inc. released the results from its third fiscal quarter, Wall Street rejoiced for two reasons. Not only were the results a bit better than expected but most analysts took Apple FQ4 2017 guidance as “proof” that the iPhone 8 will really be released in September and not sometime in the December quarter.

But if we really examine that guidance, we can see that this isn’t necessarily the case. Rather, analysts may simply be seeing what they want to see, so this hasn’t cleared any of the confusion about when that tenth anniversary handset will be released.

What was said before Apple’s results

Apple September 2017 guidance is $49 billion to $52 billion in sales, and even before the company released its results earlier this week, analysts were drawing conclusions about what they metric would mean. However, what’s particularly interesting is what Goldman Sachs analyst Simona Jankowski said before the results were released.

She believed that if Apple September 2017 guidance for revenue was $51 billion to $53 billion, it would mean that the iPhone 8 will be released on Sept. 22. Further, she said that anything below $48 billion would mean that the special edition iPhone won’t be released until sometime in October. Apple’s guidance is $50.5 billion at the midpoint, so it’s just below the low end of where she said it needed to be to indicate a Sept. 22 release.

She also said that a range of $48 billion to $50 billion would suggest a Sept. 29 release date, which is much closer to Apple’s actual guidance. Bank of America Merrill Lynch analyst Wamsi Mohan said in a note on Wednesday that the provided range is “likely a function of how many iPhone 8 [sic] they will be able to make/ ship in Sep qtr and if they are able to increase channel inventory.”

This comment dovetails perfectly with what Jankowski said before the results were released, but it also a symptom of what most of Wall Street is saying about Apple FQ4 2017 guidance.

What’s being assumed about Apple FQ4 2017 guidance

Piper Jaffray analyst Michael J. Olson flatly said in his post-earnings report that Apple FQ4 2017 guidance suggests “fears of an iPhone 8 launch delay, and/ or limited availability of the device, may have been overblown.” He also says later in the report,” This did not prove to be the case,” referencing investor concerns about a delay or limited availability for the iPhone X, a.k.a., iPhone 8. He raised his price target for Apple from $158 to $190 a share after the results.

CLSA analyst Nicolas Baratte was even bolder, as he released a full report focused on Apple FQ4 2017 guidance, which he said “suggests iPhone 8 launch / volumes on track.” He pointed out that the company has cleared its iPhone channel inventory to the lowest level in more than two years, which is what would be expected before a large product launch. He pegs the company’s implied iPhone volumes at about 46.3 million, “suggesting no particular delays and very likely shortages or limited volumes of iPhone 8 not worse than for iPhone 7.”

Why you should never assume anything

Apple has been a Wall Street darling for many years, so all analysts but a few are highly bullish. Barclays analyst Mark Moskowitz is one of the few, and he noted in his post-earnings report that the company’s strong guidance might not have anything to do with the iPhone 8 at all. Apple did see growth across all segments in its third quarter, so he explains that the company could simply have guided for strength in all of its segments.

Apple management has been turning investors’ attention to Services growth for the last several quarters, and revenue from the segment accelerated during the last quarter. Another acceleration from that 22% increase (up to $7.27 billion versus $7.07 billion consensus) would greatly contribute to the company’s top and bottom lines. Moskowitz also feels that the iPad growth could be sustainable because of the growing number of enterprise partnerships. Apple may have something else up its sleeve to continue the Mac growth as well.

UBS analyst Steven Milunovich, though he’s a bull when it comes to Apple, also said in his report that he doubts that the iPhone 8 will be out in September. Instead, he speculates that Apple FQ4 2017 guidance could indicate some channel fill and a September iPhone 8 announcement but no release. He boosted his price target for Apple stock from $170 to $180 following the results.

Apple shares stabilized on Thursday and were down 0.61% at $156.21 toward midday.

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